Understanding DeFi Concepts and Risks

The video introduces decentralized finance (DeFi), explaining its potential to transform the financial system by removing central authorities. It covers the role of Ethereum and smart contracts, the importance of stablecoins like DAI, and the functionality of decentralized exchanges and money markets. The concept of 'money legos' is introduced, highlighting the flexibility of DeFi services. The video also discusses the advantages and risks of DeFi, emphasizing the need for caution as the technology is still developing. The conclusion speculates on DeFi's future impact on global finance.

What is the primary goal of DeFi?

• To decentralize the financial system

• To centralize financial services

• To create a new form of cryptocurrency

• To eliminate all forms of currency

Which platform is essential for creating decentralized applications in DeFi?

• Ethereum

• Litecoin

• Bitcoin

• Ripple

What is a stablecoin?

• A cryptocurrency with no volatility

• A cryptocurrency with a fixed supply

• A cryptocurrency pegged to a real-world asset

• A cryptocurrency that cannot be traded

What is a key advantage of decentralized exchanges (DEXs) over centralized exchanges?

• No need for identity verification

• Higher transaction fees

• Centralized control

• Limited trading options

What is yield farming in the context of DeFi?

• A process to stabilize cryptocurrency prices

• A method to grow crops using blockchain

• A strategy to maximize returns on crypto assets

• A way to mine new cryptocurrencies

How does decentralized insurance work in DeFi?

• Through traditional insurance agents

• By using government-backed policies

• By connecting insurers and insured directly

• Through a central insurance company

What is a potential risk associated with DeFi?

• Guaranteed high returns

• Complete elimination of all risks

• Smart contract vulnerabilities

• Total control by a single entity

Why is it important to understand how a DeFi service works before investing?

• To ensure it is fully centralized

• To avoid potential risks and issues

• To guarantee profits

• To comply with government regulations

What does the term 'money legos' refer to in DeFi?

• Physical blocks used in banking

• A new type of cryptocurrency

• Interconnected DeFi services

• Building blocks of traditional finance

What stage is the DeFi revolution currently in?

• Mainstream adoption

• Early adopter stage

• Complete maturity

• Decline phase